Kentucky Administrative Regulations
Title 103 - FINANCE AND ADMINISTRATION CABINET - DEPARTMENT OF REVENUE
Chapter 8 - Ad Valorem Tax; State Assessment
Section 103 KAR 8:160 - Valuation of municipal solid waste landfill facilities
Universal Citation: 103 KY Admin Regs Service 8:160
Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO: KRS 132.020, 132.200, 224.1-010
NECESSITY, FUNCTION, AND CONFORMITY: KRS 132.202 requires the department to promulgate an administrative regulation to implement a valuation methodology for the taxation of property used as a landfill, also known as a municipal solid waste disposal facility. This administrative regulation establishes a uniform system of ad valorem valuation for a municipal solid waste disposal facility as defined in KRS 224.1-010(15).
Section 1. Definitions.
(1) "Compaction ratio" means the ratio that
expresses the relationship of the number of tons (2,000 pounds) of waste that
will fill one (1) cubic yard of landfill capacity. For example, a compaction
ratio of 0.60 means that sixty (60) percent of one (1) ton (1,200 pounds) of
waste can be compacted into one cubic yard of landfill capacity.
(2) "Cover materials" means soil or other
suitable material that is spread and compacted on the top and side slopes of
disposed waste in order to control disease vectors, gases, erosion, fires, and
infiltration of precipitation or run-on; support vegetation; provide
trafficability; or assure an aesthetic appearance.
(3) "Department" means Department of Revenue,
Finance and Administration Cabinet, Commonwealth of Kentucky.
(4) "Discount rate" means a pre-tax
percentage rate used to discount the annual royalty income over the projected
remaining economic life of the landfill to a present value.
(5) "Effective tipping fee" means the average
net dollar amount collected per ton for depositing waste into the landfill
being assessed not including surcharges, host fees, and related
taxes.
(6) "Landfill" means a
municipal solid waste disposal facility as defined by KRS 224.1010(15) but does
not include construction and demolition debris (CDD) landfills of less than one
(1) acre.
(7) "Landfill valuation
method" means a discounted cash flow, also known as yield capitalization, which
is a valuation methodology used to determine the fair cash value of a
landfill's real property.
(8)
"Other landfill income" means the five (5) year average of income generated by
a landfill from sources other than effective tipping fees, net of applicable
expenses.
(9) "Present value" means
the sum of the discounted projected annual royalty income over the remaining
life of the landfill. The present value formula is:
PV + present value of landfill |
CF = the annual projected royalty income |
Y = the annual pre-tax discount rate |
N = the number of annual periods in the projection |
(10)
"Remaining permitted capacity" means the volume of permitted airspace remaining
for the placement of waste materials.
(11) "Reversionary value" means the potential
future market value of a landfill after all post-closure regulatory
requirements, including a required minimum post-closure monitoring period of at
least thirty (30) years, have been fulfilled by the owner or
operator.
(12) "Royalty income"
means that portion of effective tipping fees and other landfill income that
would be paid pursuant to a presumed comparable market lease agreement by the
landfill operator to the real property owner in consideration for the right to
use the real property for landfill purposes.
(13) "Royalty rate" means a percentage rental
rate to real property applied to the sum of the annual effective tipping fee
revenue and other landfill income that results in the estimated royalty income
for each year of the estimated remaining economic life of the
landfill.
(14) "Tax year" means a
calendar tax year.
(15) "Ton" means
2,000 pounds.
(16) "Tons of waste"
means the five (5) year average of annual tons of waste received by the
landfill, as determined utilizing information submitted to the Division of
Waste Management for the Kentucky Department for Environmental Protection on
Form DEP 7046, as incorporated by reference in 401 KAR 47:110, Section
5(1)(h).
(17) "Waste" means waste
as defined by KRS 224.1-010(31)(a).
Section 2. Landfill valuation methodology formula.
(1) The department shall determine
the fair cash value of a landfill's real property in compliance with the
landfill valuation method established in this subsection.
(a) The department shall estimate the
remaining permitted economic life of the landfill by dividing the estimated
annual cubic yards of waste deposited into the landfill into the total
remaining permitted capacity of the landfill.
1. The compaction ratio shall be calculated
by taking the average of the five (5) most recent compaction ratios from the
Solid Waste Landfill Annual Survey submitted to the Division of Waste
Management for the Kentucky Department for Environmental Protection on Form DEP
8059, available at http://dep.ky.gov/formslibrary/Documents/DEP8059.doc. Form
DEP 8059 is the form to be submitted by a municipal solid waste landfill
permittee in conjunction with the annual survey report required by 401 KAR 47:190, Section 8. When calculating the average, consideration shall be given
to factors that alter the five (5) year average as an appropriate
estimate.
2. The remaining
permitted capacity shall be as reported on the remaining airspace line item in
the most recent Solid Waste Landfill Annual Survey submitted to the Division of
Waste Management for the Kentucky Department for Environmental Protection on
Form DEP 8059 for the landfill being assessed. The volume shall be adjusted for
the capacity consumed from the date of the survey used to prepare the
calculation, until the end of the tax year with no annual intake volume growth
over the remaining forecasted permitted life of the landfill. Actual tons for
the applicable dates shall be converted to permitted cubic yards using the
compaction ratio and the result shall be subtracted from the remaining
permitted capacity as presented in Form DEP 8059. If cover materials are used
at the landfill, the total remaining permitted capacity shall be multiplied by
.85 to account for a standard reduction of remaining permitted capacity for
cover materials.
3. The estimated
annual cubic yards of waste deposited into the landfill shall be equal to the
average of the annual cubic yards of waste deposited into the landfill for the
five (5) tax years prior to the current tax year. The landfill operator shall
report to the department the annual cubic yards of waste deposited into the
landfill for the five (5) tax years prior to the current tax year by April 30
of the current tax year. When calculating the average, consideration shall be
given to factors that alter the five (5) year average as an appropriate
estimate.
4. The remaining economic
life of the landfill shall be calculated as follows: remaining permitted
capacity (cubic yards) divided by the estimated annual cubic yards of waste
deposited equals the remaining permitted economic life of the
landfill.
5. The landfill operator
shall provide the department with copies of the annual surveys and all
quarterly reports filed by the landfill operator with the Division of Waste
Management pursuant to 401 KAR 47:190 during the five (5) years on or before
April 30 of the current tax year and a copy of its current operating
permit.
(b) The
effective tipping fee shall be calculated by dividing landfill historical
tipping fee revenue (excluding surcharges, host fees, and related taxes)
collected for the five (5) most recent tax years by landfill related historical
tonnage for the five (5) most recent tax years as demonstrated by the records
of the landfill operator.
1. The landfill
operator shall provide the department with its calculation of the effective
tipping fees for the five (5) tax years prior to the current tax year, together
with its annual operating financial statements for each tax year, that shall
include tipping fee revenue, expenses for surcharges, host fees and related
taxes, and other landfill income.
2. The department shall review the effective
tipping fees calculation submitted by the landfill operator and shall estimate
the forecasted effective tipping fee for the current tax year. Increases in
forecasted effective tipping fees shall be determined by an indexed factor not
to exceed the annual Consumer Price Index (CPI), as defined by KRS 154.30-010(11), for the year prior to the current tax year.
3. In estimating the annual effective tipping
fee, the department shall consider any facts or circumstances that exist that
may have an impact on current or future effective tipping fees.
(c) The department shall estimate
the other landfill income for the current tax year based upon the records of
the landfill operator for the five (5) tax years prior to the current tax year.
1. The landfill operator shall provide the
department with its calculation of other landfill income for the five (5) tax
years prior to the current tax year, together with its annual operating
financial statements provided pursuant to this section.
2. The department shall review the other
landfill income submitted by the landfill operator and included in the
operating financial statements submitted and shall estimate other landfill
income for the current tax year and any annual increase in the other landfill
income.
3. In estimating other
landfill income, the department shall consider all relevant facts or
circumstances that exist that may have an impact on current or future other
landfill income.
(d) If
the landfill does not have five (5) years of operating data, due to its date of
first operation being less than five (5) years prior to the current tax year,
the department shall determine the landfill's compaction ratio, consumed
landfill capacity, estimated annual cubic yards of waste deposited, effective
tipping fees, and other landfill income as a rolling average of the number of
years for which operating data exists for the landfill.
(e) The department shall estimate an annual
royalty income for each year of the landfill's remaining economic life by the
following calculation: (((effective tipping fee f" tons of waste) + other
landfill income) f" royalty rate) - general administrative expenses = royalty
income.
(f) The department shall
determine the present value of the royalty income of the landfill for all
remaining years of its remaining permitted economic life by applying the
discount rate to each year's royalty income as determined pursuant to paragraph
(e) of this subsection.
(g) The
discount rate shall be twenty (20) percent unless the landfill operator or the
department establishes a higher or lower discount rate based upon applicable
market factors and the applicable facts and circumstances attributable to the
landfill.
(h) The present value of
the royalty income for all remaining years of the landfill's remaining economic
life shall be the landfill real property valuation to be used as a tax
basis.
(i) The royalty rate shall
be fifteen (15) percent unless the landfill operator or the department
establishes a higher or lower royalty rate based upon applicable market factors
and the applicable facts and circumstances attributable to the
landfill.
(j) The department shall
estimate a reversionary value, if any, as of the date that all post closure
regulatory monitoring requirements of federal, state, or local governments are
completed. The reversionary value shall be discounted to its present worth as
of January 1 of the current tax year and the resulting value shall be added to
the sum of all year's present values as calculated pursuant to paragraph (f) of
this subsection.
(2) The
fair cash value of any other real property, including improvements, not already
included in the valuation of the landfill through the landfill valuation method
shall be assessed by the department in the same manner as real property of all
other taxpayers under KRS Chapter 132.
(a)
State and local real property taxes shall be applied to the assessed value of
the other real property and shall be added to the taxes assessed on the real
property value determined by the landfill valuation method.
(b) The landfill operator shall provide the
department with a summary statement of the total acreage of land owned by the
landfill company, the total acreage of the permitted landfill area, and the
total acreage of the active contained landfill.
(3) Any information required to be supplied
by the landfill owner or operator in connection with this administrative
regulation shall be held in strict confidence by the department unless
otherwise required by law.
(4) The
allocation of value of tangible personal property incorporated into a landfill
and certified as pollution control pursuant to KRS 132.020(1)(k) shall be
determined by taking the present value of landfill royalty income, as
determined in subsection (1) of this section and subtracting out the value
attributable to undeveloped land and the value attributable to real property
structures (i.e., demonstrative and nonexclusive examples of which include
maintenance buildings, perimeter fencing, etc.) not certified as pollution
control. The remaining value shall constitute the value allocation attributable
to certified pollution control tangible personal property incorporated into the
landfill.
STATUTORY AUTHORITY: KRS 131.130, 132.202
Disclaimer: These regulations may not be the most recent version. Kentucky may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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